When sales are down, one way to improve your bottom line is to reduce overhead costs. Even if your company is doing well, it’s not a bad idea to review your overhead expenses to determine if you have added costs you don’t really need or if you’re overpaying for any. Creating several benchmarks will help you determine whether or not you need a particular spending category or if you can get that necessary expense for less.

Impact on Sales

Many overhead costs relate to sales. These include research and development, marketing planning, advertising, promotions and public relations. Write a list of those overhead expenses that pertain to sales, and review each one to determine if it's necessary or if you can reduce your spending on it without a decrease in sales that negates any savings from the cut. For example, you might look for free and low-cost marketing options, such as social media sites, to replace paid advertising.

Legal Compliance

Some overhead costs help you fulfill your legal obligations. These include licenses, bonds, insurance, taxes and fees. A security system might not increase your profits, but it can help you reduce or eliminate theft or more serious security problems. Look at costs such as insurance to determine if you can reduce your coverage or lower deductibles to decrease your premium payments. Check the workers’ compensation classifications of your staff to determine if you can reduce your premiums there.

Employee Morale

Free soft drinks or monthly employee birthday parties don’t increase your sales, but they can help maintain or raise employee morale. Perks can help make you an employer of choice and decrease attrition. While an employee might not stay with you because you offer a commuter rail pass, if it’s one of several perks that create an attractive compensation package, continue offering it.

Impact on Productivity

Your employees can often make do with less equipment, fewer resources or older technology, but that might mean they produce less quantity and quality of work. Giving your employees smartphones, for example, might result in their taking more emails and responding to calls during evening and weekend hours. Before you cut back on software licenses, determine if asking employees to share computers will reduce productivity.

Competitive Price

Just because an overhead item is necessary doesn’t mean the expense is justified. If you haven’t bid service contracts lately or shopped for new leases, do so to make sure you aren’t overspending on overhead. Simply asking a contractor for a reduced fee can result in cost savings. Keep an eye on occupancy rates in your building and real estate transactions in your area to determine if you can negotiate better rent or a lower building lease. You might find that after you pay for the cost of a move, a lower rent or lease for a new location is not justified.

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About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.